Raymond James vs. LPL

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Indyone's picture
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I am deep into the due diligence process of trying to decide which way to go as an independent.  Thus far, I have seen a lot of good things from both BDs, but am curious what posters with experience (or research) with both firms found out for themselves.  As near as I can tell, LPL looks to have the superior fee-based platform and a better payout (84.4% vs. 81.2% on our hypothetical production run)while Raymond James has a nice mid-cap research team and a broader range of services, such as investment banking and a bond inventory.
Any insight into this comparison would appreciated.

csmelnix's picture
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Both are solid firms.  Maybe it'll boil down to your business model and business plan moving forward.  My bias is to LPL however.  In terms of bond inventory - that's a non issue.  LPL shops the street v holding inventory.  They have a very solid bond department that will build portfolios for you if needed or make recommendations.  The reason for not having inventory is simple; the margins are so narrow in the bond arena that you don't need to hold any, go to the street makes much more sense.  RJFS holds inventory because they are trying to make some profit there; they'll mark up that bond more than LPL would which limits you a bit more in pricing and yield (as well as net to you).  Same goes with investment banking.  It boils down to this, I believe, RJFS holds the traditional wirehouse model.  That is, you have the advisors (including all their different channels), product manufacturing, investment banking, bond desk etc.. all competing for corportate support and dollars.  LPL has none of that, the only people competing for LPL corportate support and dollars then are LPL Advisors.  And the only way LPL makes those dollars is by ensuring they are providing that support to it's advisors.  So when there's $80m to spend on the business - at RJFS all those competing centers get a portion of that, and guess what, more money goes to the centers that are more profitable; and the independent advisors are least profitable than all the others.  AT LPL, $80m gets reinvested back into what drives the advisors business, alllows them to service their clients better, run their business more efficiently etc.  To me, this is above all else what is different between the two. 
CM

Indyone's picture
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CM, thanks for your insight & good point on the bond inventory issue.  I hope I can get several good posts from both sides so perhaps this forum could be of value to anyone trying to choose a BD for an independent operation.
Any other opinions/rebuttals?

Duke#1's picture
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Indyone, from the RJFS perspective the only things I'd clearly agree with from csmelnix is that both firms are solid and your business objectives will be an important factor in making a decision.  Other than that, I'll offer a contra opinion.
I'll strongly disagree with his bond commentary, both factually and theoretically.  RJFS does not hold bond inventories just to make a profit.  Their traders build inventories to meet demand, both on the buy and sell side.  They get to know the reps who do a lot of bond business.  They know what types of paper these reps are always looking for, and when they come across an attractive price for this paper they'll buy it and place it in inventory for these reps to work against.  On the sell side, they'll take product into inventory from reps (assuming it's paper that's suitable for the inventory), typically at a better price to the client than if it were just shopped on the street.  This is particularly important with smaller lots where you'd get killed selling to the street. 
But, the vast majority of RJ's bond business is not done through its inventories.  They buy on the street like LPL (actually through their system any rep can buy from the street from our desktops if they don't need to access the desk for special needs).  BUT, and a big BUT -- anything that's bought that way is NOT marked up by RJ.  These are considered "riskless transactions" by RJ (i.e., no firm capital is at risk), so whatever the street price is is what you're buying it for.  LPL, on the other hand, marks up all their bonds, and at a hefty amount.  (One of RJ's bond traders used to be on LPL's desk and that's how we learned all this.)  But, the best way to test this is to submit a list of bonds to each firm and get their prices before your mark-up (the recruiter you're working with at each firm can do this for you).  You'll find RJFS prices will beat them consistently.
RJ's bond area is also much deeper than LPL's, giving considerably greater service & support.  They've got 14 taxable fixed income traders and I believe slightly more on the muni side.  I don't know LPL's #, but I can guarantee it pales in comparison.
Re the comment about RJ having to use corporate dollars to support areas not directly affecting its indy reps, that's strongly debatable. RJ is a very entrepreneurial firm and each business unit is a business unto itself.  Investment Banking, for example, is funded by investment banking revenues, not from corporate dollars that are directed from other areas.  In fact, since IB is a highly profitable business, that area is generating revenues that add to the RJ corporate coffers (which can then be used to support other areas of the firm, like technology, etc.) -- it's a contributor to resources supporting the RJFS reps, not taking away from it.  And, the LPL guys' position that most corporate dollars go to areas that are more profitable than the indy side because that's not a profitable area, is hogwash.  Hogwash not only for what I said just before, but also because RJFS is the biggest contributor to revenues and profits to RJ.  RJFS is the tale that's wagging the RJ dog.  It's no accident that Chet Helck, the President & COO of RJF (the parent company), came from the RJFS management team and was formerly a retail producer (at Jones).
Having said all this, make a list of all those things that are important to your practice and your clients.  Also make a list of any other things you'd like to access to grow your business.  Then have your recruiters have you visit their respective corporate headquarters to meet with every area of the firm on your list that's important to you.  That's the best way to make an evaluation, both of how each firm can meet your needs and to better understand their culture.  Also, get a list of reps at each firm that came from your current firm and talk with them.  Also, get a list from each firm of reps that left either LPL or RJFS and went to the competitor and talk with them re their reasons why they left and what their experiences are like now.
BTW, I'd have to take issue with your comment that LPL's fee business is superior to RJFS.  But, I'll leave that to you once you have a chance to visit each firm.
Again, both firms are good choices and your decision will be based on their applicable resources and respective cultures.  If you're coming from a full-service firm, I think you'll find RJFS comes out ahead.  It's no accident that around 70% of it's reps come from full-service firms.  They are attracted to RJFS in great measure because it can better replicate all the things that both the rep and their clients have become used to.  If you're primarily doing packaged products and just need a solid fee-based platform, then either firm should work well for you.

Indyone's picture
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Another great piece of feedback, which I really appreciate, Duke...thanks.  Some feedback related to your reply...both recruiters have been onsite already and I am in the process of looking at the technology platform right now.  I'm trying to avoid making two due diligence trips as that is just more time out of the office than I want to take right now.  Interesting enough, I have asked for a list of referrals from each of them and I in fact used the criteria that you described (people who have been associated with both firms).  Having seen the fee-based platforms, and especially given RJ's problems with their fee in lieu of commission piece, I still believe that LPL has them beat there.  That being said, my mind is far from made up yet.  I have a gut feel for which way I'll end up going, but in the interest of giving both sides an equal shot, I'll keep that part to myself for now.  Besides, the rest of my due diligence (and what CREDIBLE evidence I see in the forum) may very well swing me the other direction.  Odds are, there will still be plenty that I find out after joining one of the two firms.  My hope is that I eliminate most of the surprises beforehand and in that regard, I appreciate the opinions in both posts thus far.  Thankfully, the debate is staying on the intellectual side, but I'd also be very interested in seeing some posts from indys who've been affiliated with both firms.  Thanks again for your insight.

blarmston's picture
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IndyOne- where are you currently at? What level of production, service, etc??

Indyone's picture
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Bank channel about $375 annual gross w/40% of that fee-based.  Don't want to say much more in case the boss surfs these forums.  Looking to exit sometime this summer...

Indyone's picture
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$375K...sorry for the typo

csmelnix's picture
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Not to get into a back and forth with this on RJ V LPL.  The bond info on the reply to me was wrong.  LPL absolutely doesn't mark up their bonds - your info is wrong and the person who came to RJ from LPL is feeding you bull.  The ability to buy bonds at LPL is from the desk top straight from the street.  On the fee based comments indyone - you are dead nuts.  No other b/d out there has the sales support, platforms, and openness to their platforms as LPL.  LPL also has just lowered ticket charges in their SAM platform; again, one profit center allows them to do that; RJFS can't do that.  Also, it is a well known fact that independent models margins are extraordinarily slim; RJFS is the least profitable of all the businesses they operate compared to the bank channell and RJ advisors.  And from a profitability stand point, is ahead of only the bond desk and investment banking (due to the decrease of that business over the last 3 yrs).  Even if the other argument was correct, there is no getting around the other centers still competing for the corporate dollars v the LPL model.  Which will lead me to my last point; indyone, when you go independent, do you wish to be known as Raymond James Financial or do wish to brand your name as who your clients are doing business with?

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CM, Thanks for the post, although I think you misread me.  I still view LPL's fee-based platform as superior...Duke is on the other side of your argument.  I'm glad to have a couple of posters who are very sold on their business model...it's helpful in differentiating between the two firms.  As long as Put-trader stays away, I'll be satisfied.

csmelnix's picture
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I couldn't agree with you more.  At the end of the day it should be comforting to you that there are a couple people out there standing by their model.  As I said first, both are solid firms.  As for misreading you, I actually was saying I thought you were 100% correct and was agreeing with your comments on LPL's fee based business.   One bit of advice, if you can do it, visit both firms; you owe it to yourself to insure you see the operations of both so that you can make the most informed decision.  I can tell you from experience, I have dealt with an advisor or two than all but made up their mind up to a visit.  So if you can, you really should try to see both.

indytwo's picture
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 Hello indyone its indytwo.  Im enjoying the conversation you've started.  I would like to know the production level of the other people that are chatting.  So csmelnix what do you do per year in commissions.  AUM? etc thanks for the info

csmelnix's picture
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I'm not a large producer; more avg than anything I guess.  I do about $400 GDC w/ almost $50m aum. 

indytwo's picture
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thanks csmelnix.  Your info is very helpful.  Any other advice you have for someone going independent would be helpful.
 
 
thanks

Duke#1's picture
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csmelnix wrote:Not to get into a back and forth with this on RJ V LPL.  The bond info on the reply to me was wrong.  LPL absolutely doesn't mark up their bonds - your info is wrong and the person who came to RJ from LPL is feeding you bull.  The ability to buy bonds at LPL is from the desk top straight from the street.  On the fee based comments indyone - you are dead nuts.  No other b/d out there has the sales support, platforms, and openness to their platforms as LPL.  LPL also has just lowered ticket charges in their SAM platform; again, one profit center allows them to do that; RJFS can't do that.  Also, it is a well known fact that independent models margins are extraordinarily slim; RJFS is the least profitable of all the businesses they operate compared to the bank channell and RJ advisors.  And from a profitability stand point, is ahead of only the bond desk and investment banking (due to the decrease of that business over the last 3 yrs).  Even if the other argument was correct, there is no getting around the other centers still competing for the corporate dollars v the LPL model.  Which will lead me to my last point; indyone, when you go independent, do you wish to be known as Raymond James Financial or do wish to brand your name as who your clients are doing business with?
Sorry to belabor this, but I can't ignore the innacuracies and/or false impressions of this post. 
Unless LPL has changed the way they do bond business within the last few months, they DO mark up their bonds.  I got this direct from an LPL rep who approached me about joining my firm.  But, as I suggested before, let the proof be in getting bond prices from both firms at the same time.
Re fee business, we obviously have different opinions. Again, visit the respective firms and delve into the depth and breadth of what they're each providing.  RJ has over 120 people supporting their fee business alone, and that's without including the research analysts that design the model portfolios for RJ's asset allocation programs. 
Re profitability of RJFS versus other areas in the firm, I don't know the bank channel profitability, but contrary to what was stated, historically RJFS has produced higher bottom line margins than their NYSE sister company (RJ&A).  It is clearly not the "least profitable of all businesses they operate".  But, while I totally agree that all independents run on fairly thin margins, if someone was concerned about the available financial resources of a company,  would you want one that was totally dependent on the thin margins of independent contractors (LPL) or one that also had other profitably business units that contribute to the bottom line (RJFS)?
cs, what in the world do you mean by your final point question about who do want to branded as???  You seem to be implying that at RJFS I can't use my own business name; that's totally wrong. RJFS is no different from LPL.  At both firms you can brand with LPL, RJ, or your own business name.  While I'd guess more LPL reps brand with their own name than at RJFS (because the LPL name has no public awareness value), whatever you choose is up to you at either firm.  Having said that, if anything I'd rather be with a broker-dealer (even though I use my own business name) that has name recognition (RJ) than a b/d that has no public visibility (LPL).  It's a marketing truism that, all things being equal, a consumer (investor in this case) will pick the company they've heard of.  Having the RJ name, the national RJ advertising, RJ Stadium, RJ analysts regularly appearing on CNBC, etc., and it's public company stature behind me has been an invaluable asset to building my business.  That is a clear weakness of LPL for those who care about such things.  If you've been with LPL for any period of time you know that is a competitive concern of theirs.  They even had an aborted national ad campaign (full page WSJ ads, etc.) several years ago to try to get some name recognition.  That irritated LPL reps tremendously, in great measure because LPL ran that ad program and they directly charged all their reps with the cost of it.
Indyone, re your comment about not wanting to take the time to visit both firms --  You're making a decision over what you should view as the last b/d change of your career.  To not invest the time to do thorough due diligence and visit both firms doesn't seem the wisest thing, for either you or your clients.  Just relying on a recruiter visit to you is not enough to give you what you should need for that decision.  Recruiters are salesmen.  If one of those just happens to be a better salesman than the other (or less candid or more missleading than the other), you may end up making the wrong decision. 

Indyone's picture
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Looks like everyone is recommending two due diligence trips, which I know is the correct answer.  I do intend to only do this once so I want he decision to be right.  Duke, you counter with some valid points, although I continue to remind myself that both you and CM are naturally biased toward the BD you are with.  Good point on name recognition...Raymond James definitely wins on that point, although to me, name recognition of the BD is waaaaaay down the list.  I can't think of a single instance in competing with other advisors where "all other things have been equal".  Either I didn't have a chance or they didn't, depending on the situation.  It's rarely close, and even when it is, my experience is that it's usually the rep rather than the firm that breaks the tie.  Sure, name recognition could win me an account, but I really think those opportunities will be very few, particularly given the set-up I am looking at.  Also on the flip side, if your firm screws up like many of the bigs have recently, name recognition can be a real negative.  Bottom line, I'll use my name anyway, so I'm pretty indifferent about the name recognition issue.
Thanks for another informative post...now I need to try and schedule two trips out of the office (sigh)...

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Indy, I don't disagree with your name recognition points at all, and understand that may not mean much to a lot of people.  So, only speaking from my personal experience, I've found it has helped in a number of situations.  It may be entirely different with you and others.
It's been valuable on a number of occasions to more quickly establish initial credibility with a prospect.  Ultimately I may still have gotten the opportunity to prove myself to be able to successfully compete for their business, but I clearly have felt the RJ name got me to that point quicker.  I felt the name was also invaluable in making my ACAT transition to RJ quicker ten years ago (even when the name wasn't so nearly as visible as it is today).  When I told my clients I had left the well known wirehouse to establish my own independent practice, they all were naturally inquisitive about who I'd be with and who'd be holding their assets.  Even if some didn't know the RJ name at the time, I was able to confirm the substance of RJ with annual reports, etc. since it's a public company.  Ultimately, I'm sure I'd have gotten my ACATs over, but based on how often the question came up about my new b/d, the ease with which I was able to overcome any potential objections was readily apparent.
At this stage the vast majority of my new assets are through referrals, so actually the RJ name is probably not as important as it once was for me.  But, I still get a kick out of talking with clients who say, "hey, on TV on Sunday I watched the game at "our" stadium".  I also get some mileage in emailing my clients when an RJ analyst is scheduled to appear on CNBC, etc. so they can see what they have to say.
Now, get busy clearing your calendar for those two visits!

indytwo's picture
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Duke
Thanks for the insight. How long have you been with RJ? (ten years?) What level of production are you at and how does your production break down.  Thanks
 
 

indytwo's picture
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 does anyone else have a good or bad experience to share about either firm????????????????????????????????????

Oracle's picture
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Indyone wrote:
I am deep into the due diligence process of trying to decide which way to go as an independent.  Thus far, I have seen a lot of good things from both BDs, but am curious what posters with experience (or research) with both firms found out for themselves.  As near as I can tell, LPL looks to have the superior fee-based platform and a better payout (84.4% vs. 81.2% on our hypothetical production run)while Raymond James has a nice mid-cap research team and a broader range of services, such as investment banking and a bond inventory.
Any insight into this comparison would appreciated.

Indyone,
Is Raymond James even able to hire anyone right now?
Take a look:
http://www.bizjournals.com/tampabay/stories/2005/05/02/daily 38.html
Part of the article says:
"In addition, the division of enforcement has asked the judge to appoint an independent consultant to review Raymond James' compliance polices and procedures, and to suspend the company from hiring new financial advisors and opening new offices until the recommendations of the independent consultant have been implemented."
Oracle
 
 
 
 

Starka's picture
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I think RJFS is open to the indy channel, BPD.

Indyone's picture
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That's what I think.  Apparently they can still set up independents, as they are recruiting several of us who are looking, and even offering up-front money and other perks.  I'm a little surprised about offering independents up-front money when there are essentially no strings attached.  Obviously, it's not anywhere near the levels offered to captive brokers, but I didn't expect anything in that area, so it's a nice plus.  It's apparent that I've been out of the loop as to what was available, but until I got fed up with the bs from my current employer, I had no interest in seeing what was available...

indytwo's picture
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oracle
thanks for the insight.  Had no idea that Rj may not be able to hire.  If anything this could help in my negotiations. I do not like the fact that this would be the first things my customers would have to deal with after they transfered.  What b/d's are you looking at?  where are you currently wirehouse, bank etc
 
 

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Starka's picture
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You must have misunderstood, BPD.
Indyone is trying to advance his career.

BigPayDay's picture
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Starka,

So what's your recommendation?

BPD

indytwo's picture
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wow i would never work for ed (sell what we tell you to)Jones. 

Indyone's picture
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In no way, shape or manner would I consider EDJ at this point.  Too many restrictions, tech stinks, all the reps arund here sell the same stuff.  When someone brings me a Jones statement to review, I know what's going to be in the portfolio before I open it up.
Starka, you're dead on...I want to ADVANCE...

BigPayDay's picture
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Indyone and two,

Why don't you try Starka's firm?

BPD

indytwo's picture
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hey candybar can you buzz off you have no knowledge of indy you drank the coolaid and your brain must be warped to stay at edj

BigPayDay's picture
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Indytwo,

Who do you work for now?

BPD

Indyone's picture
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BPD,
I'm glad you're happy with EDJ.  From my research and desire for independence, I know it's not for me.  If Starka is with RJ or LPL, there is a very good chance I'll try Starka's firm.  I really don't want to turn this into another "debate the merits of EDJ" forum, so I'll ask politely for everyone to keep this on topic discussing the merits of LPL & RJ.
and yes, I realize that I already violated this by telling y'all why I wouldn't work for Jones...sorry...won't happen again...
Hey Starka...who's your BD?

BigPayDay's picture
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Indyone,

Starka is so proud of his BD he won't tell you or anyone who it is.

If you're going independent make sure to read the article in the April 05 On Wall Street. See page 41. It has a good break down of the true costs of going independent. Their break down showed a 55% payout from 90% after all costs.

It was an eye opener.

What don't you like about your current firm?

BPD

Indyone's picture
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pretty much everything...and no one will listen to me, so I decided that the only way to run a business my way is to run my own business.
...and not that money matters, but 55% would be a dramatic improvement over what I'm looking at now...and I'm pretty confident that mine will be a much lower overhead office than that...

BigPayDay's picture
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What kind of business mix do you have? How many assets?

BPD

Indyone's picture
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see my post on page 1...already answered that one.

Oracle's picture
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Indyone,
Are you looking to do fee based?
http://sev.prnewswire.com/banking-financial-services/2005042 8/DCW03427042005-1.html
You undoubtably have seen this but just in case you hadn't.
And LPL has some challenges with revenue sharing on their annuities:
http://www.kglg.com/case/case.asp?lngCaseId=4231
Not a big deal, but may effect your success of your clients following you.
Oracle
 

Indyone's picture
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Oracle, yes I do a fair amount of fee-based.  Good posts and good information.  I'm glad to see some others getting involved in the discussion and tell us some things that the recruiters don't.  I was aware of RJ's fee-based issues and I think they'll get them resolved in a satisfactory manner so I'm not overly concerned with that.  I hadn't heard about this issue with LPL, although I'm not terribly surprised.  I would be more surprised if there was a BD that hadn't tried to pull any funny stuff in the past.  That brings me back to an earlier point...I will private label my business...it won't be called LPL or RJ.  I don't want anyone's negative press bringing down my reputation, so the further they are in the background, the better...

Starka's picture
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That's VERY interesting about LPL, considering the fact that LPL is not a publicly traded company to the best of my knowledge.  How, I wonder, can nonexistent shareholders sue?
Sounds like ambulance chasers to me.

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BigPayDay wrote:Starka, So what's your recommendation? BPD
I don't know anything about Indyone, other than what was posted, so how can I make a recommendation?  The one thing I can say for certain is that if Indyone has an indy mindset, as his name would imply, the one place he DOESN'T belong is Edward Jones.

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Oracle, re your post about RJ being able to hire.  That is just a proposal from the SEC to the court in dealing with the Herula case (a rogue RJFS broker in Rhode Island).  It does apply to RJFS (no other part of RJF), but is only the SEC recommendation.  It is not in effect, and may never be depending upon how the judge ultimately rules on the case (which I think is expected sometime in July). RJ is obviously vigorously defending the whole matter in court.
Also, Oracle, re the fee-based issue at RJ -- this only dealt with a fee-based brokerage account that RJ began offering in 2001.  That's a straight "fee in lieu of transaction" account that RJ chose to offer to complement all its other fee-basd biz.  It's not an advisory account (i.e., where both transactions and advice are being rendered).  Regulators have taken the position that these brokerage accounts (not advisory accounts) are to be viewed as straight transaction accounts, and if a client would have been better off paying commissions than paying a fee, they were innappropriate (regardless of whatever other value the rep was bringing to the table).  So, RJ decided to reimburse the affected clients $138,000 and just stop offering the brokerage account entirely.  Clients in these accounts are being given the option of going to a regular commission account or convert to RJ's existing advisory accounts.  The vast majority are now in the advisory accounts. The point to all this, is that RJ is still very much in the fee-based biz as always.  RJ was the first b/d to be hit with this issue, and several other firms (including the wirehouses that started these "fee-based brokerage accounts") are being investigated as well.  
Here's a good article from "On Wall Street" mag that addresses the regulator vs broker-dealer issues with fee-based brokerage accounts:   http://www.onwallstreet.com/detail.cfm?page=/pubs/ows/200506 01002.html

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indytwo wrote:
Duke
Thanks for the insight. How long have you been with RJ? (ten years?) What level of production are you at and how does your production break down.  Thanks

Yep, 10 yrs -- actually will have my 11th anniversary this summer.  Most is annuitized -- 25% trails, 45% fee-based (SMAs mainly, plus mutual fund/ETF wraps, & some managed futures accounts).  Rest is about 10% ins/annuities, 5% alternative investments, & balance is mostly stocks & bonds on commission.  Would rather not give specific gross, as someone at RJFS could come close to identifying me & I want to preserve anonimity.  But, I'm above $500k & below $1mm.

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For those of you at either firm, I would appreciate your honesty and candor in this regard...what is the one thing that you'd really like to have that you don't have?  Don't worry about shooting your firm in the foot...think of it as providing a public service to those of us trying to make a decision.
Now be honest...I know neither firm has everything, OK?!!!

troll's picture
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Oracle wrote:
Indyone,
Are you looking to do fee based?
http://sev.prnewswire.com/banking-financial-services/2005042 8/DCW03427042005-1.html
You undoubtably have seen this but just in case you hadn't.
And LPL has some challenges with revenue sharing on their annuities:
http://www.kglg.com/case/case.asp?lngCaseId=4231
Not a big deal, but may effect your success of your clients following you.
Oracle
 

 
Clearly the attorneys in the case cited above re LPL are a bunch of MORONS!  They've attempted to solicit participation in a shareholder lawsuit against LPL.....but....errr.....LPL isn't publicly traded!  It's privately held.  How do you file a class action lawsuit by 'recent purchases of LPL securities' when the thing isn't traded?  Help me out here???

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Joined: 2005-06-01

Thankfully somebody else mentioned this but I have to add in.  LPL is not publicly traded so no shareholders are suing LPL.  In terms of the VA suit - LPL was dropped from the suit approximately one month ago. 
New news that's accurate however is RJ has dropped it's fee in lieu of commission platform due to continued abuses by it's advisors and their inability to properly supervise.  Not my words but those of the regulators. 

csmelnix's picture
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Joined: 2005-06-01

The one thing we don't have that I wish we did?  Hmmmm.....; From a technology standpoint, we can do block trading but it's a bit labor intensive to trade across multiple accounts.  For example, if I had say 30 accounts that were in a specific risk/model category and all held say 8% GE stock.  Then the value shot up or down and I want to trade it/buy it to bring it back in line to the 8% it's not a matter of point and click to do it across mulitple accounts.  From a ticket charge cost stand point and time stand point it's not as efficient as it could be.  My understanding is there is an initiative at LPL now to build this out for release by mid-2006.  Hopefully it will. 
 
On a side note indyone - you mentioned you would be moving from a bank, correct.  One thing to really research is to identify your top production clients.  That is where you should focus on for moving assets.  A goal should be to move 80% of your production not your book.  Hey, one other comment too, on the 55% payout after expenses; that figure is so B/D dependent but more importantly, under the indy model - you control that costs.  There are fixed costs obviously, but beyond that, you get to determine how you spend the money, in areas that benefit you v a firm.  So for the wirehouse and jones people to point that out is a joke.  No indy b/d takes 60 cents on the dollar and spends as they determine, we take 10 cents on the dollar and let you spend the rest as you determine.  Like you said pretty much in your reply to that, the fact that you have the freedom to make those choices is the attraction to being independent.

Indyone's picture
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Joined: 2005-05-31

CM, I've seen a tech demo on LPL...and will soon see one on RJ also.  The LPL tech was awesome...much better than what I am used to. Thanks for the honest feedback on the platform.  Switching gears, I posted the following on the legal forum, but thought I might get more feedback here since the traffic is better...anyone out there...feel free to comment, and thanks in advance for any constructive opinion/advice...
I know that much of this post is a re-hash of information that has been posted on these forums in the past, but it is a summary of what I have found during my due diligence, along with some of my questions that I would appreciate some feedback on.
I started in the bank channel a bit over five years ago, and on the third day of my employment, I basically had a non-compete thrust in front of me that I was asked to sign.  While I had slight misgivings about the general nature of the document, I was grateful for the job opportunity, never dreamed of the day when I would be dissatisfied, and was fearful of the possible consequences if I refused to sign the document.  Of course, like almost all naive rookies, I signed the non-compete.  Where I retained the intelligence to keep a copy, I have no clue.
Now that I am very unhappy due to several adverse changes in the compensation schedule, and a bunch of mandatory UNPAID training days, I am looking at this stupid document and cursing myself for ever signing it.  Not only is there a one-year nonsolicitation clause, the firm went one step further and put a non-compete clause in that essentially completely bars me from being in the business in my current geographical area.  So unless I want to either move away or completely change careers, I feel helplessly locked in with my current employer.  I can understand the non-solicitation clause to a degree and I have no intention of sending out a form letter to all my clients saying dear clients, I have moved out.  Please come in and see me if you want to move your accounts to my new firm.  On the other hand, I am struggling with the fairness of a company telling me that I cannot make a living unless I move away or change careers.
After spending some time doing due diligence, I have reached several conclusions based on feedback from the firms I am looking at.  First of all, most everybody is in agreement that the clause barring me from being in the business in the same town is pretty much non-enforceable.  The comment I keep getting is that the firm cannot tell me that I cannot earn a living.  Apparently, the courts in the past have taken a pretty dim view of these clauses and elected to bar enforcement.
The second opinion that I keep hearing is that while I cannot solicit former clients for one year, my current (soon to be former) firm cannot prevent clients from coming to me and requesting the move.  Neither can my current firm prevent me from advertising in the local newspaper, or having an open house, either of which can certainly generate requests from former clients to move to my new firm.
Finally, and probably most obviously, my current firm cannot prevent me from chasing after new prospects that were not customers when I leave. So, if nothing else, it appears that these folks are fair game from day one.
Some questions I still have that I'd like for posters to address are 1.  What are my actions limited to if my previous firm files a TRO?  Does that completely stop me from all business or just transferring clients over from the old firm?  2.  Given my overall situation, if I follow the advice I've received thus far, what is the probable outcome of any action brought by my old employer?
Naturally, I am concerned about being able to make a living during the first year and yes, before you even ask, I will be consulting a securities attorney before I effect this change.  I am intersted in your opinions and if I am mistaken, your corrections, and of course, all constructive advice is appreciated.

doberman's picture
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Joined: 2005-02-22

Did you know about the "noncompete" contract before you started with the bank? If not, you might have an out.
In my situation, I beat back some New York lawyers who wanted me to fork over training expenses. I interviewed with Dean Witter 3 times in the early '90's, and was hired. I quit my bank job as Assistant Bank VP, sold my house, and moved across state. My first day of employment at DW, they shoved a "noncompete and reimbursement of training expenses" contract in front of me for me to sign. No one had ever mentioned such a contract during the 3 interviews. I had never worked where an employment contract was required. I had to sign, what else could I do?
I left DW a couple of years later and one of their NY lawyers called me to say they wanted $25,000. I let them have it. I explained what happened and said that I was considering suing them for not mentioning the existence of an employment contract during any of my 3 interviews and that such a contract was a condition of employment. 
When the lawyer replied, "Well, you didn't have to sign it.", I told them that I had quit my bank job, sold my house, and moved across state, what the hell else was I supposed to do? The lawyer got quiet for a minute, then said thank you and hung up. That was 10 years ago.
You don't mention it, but if the bank did not mention the existence of an employment contract, during your interview(s), you might have a case of "having to sign the contract under duress". The "duress" being you had already quit your previous job and had no other choice but to sign the contract. Also, you might charge that the bank negligently or fraudulently omitted telling you of the requirement of a noncompete contract, prior to your employment.
Thus, if you weren't aware of the contract prior to employment, you might have a good case for getting out of it. (It worked for me in getting DW's attorneys off my back!) Consult a lawyer, in any event.
 

troll's picture
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Joined: 2004-11-29

LPL's technology is pretty impressive so far, although my experience is limited.

I never looked at RJ too closely because I found their recruiter to be
rather arrogant, and wasn't entirely comfortable with the fact that
they had a decent sized investment banking business.

Indyone's picture
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Joined: 2005-05-31

Doberman, I had a couple of interviews prior to taking the position and no, I'm confident that a non-compete was never mentioned prior to my employment, although we could get into a he-said-she-said argument on that one.  At one point in my thinking process I thought about the possibility of arguing this point, but I wasn't sure how much weight it would carry.  All I know is that I really didn't feel like I had any choice when the request was made for me to sign the non-compete as I didn't have any other job to go to.  I'll bet in practice that unless the prospect has a non-compete at his/her current firm, many prospective employers fail to mention the infamous non-compete in the interview process...it's not exactly an enticement to join.
I also thought about the fact that I never received anything (other than my continued employment) in exchange for signing the non-compete, so you could argue that there was no real consideration given to me.  Worse yet, the grid has changed since I started with the payout getting thinner.  That too, seems like a reason that the non-com shouldn't stand, but perhaps I'm just getting emotional.
Joe, thanks for the post.  I'm curious who your RJ recruiter was...maybe you could PM me on that?

troll's picture
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Joined: 2004-11-29

Indyone wrote:Doberman, I had a couple of interviews prior to
taking the position and no, I'm confident that a non-compete was never
mentioned prior to my employment, although we could get into a
he-said-she-said argument on that one.  At one point in my
thinking process I thought about the possibility of arguing this point,
but I wasn't sure how much weight it would carry.  All I know is
that I really didn't feel like I had any choice when the request was
made for me to sign the non-compete as I didn't have any other job to
go to.  I'll bet in practice that unless the prospect has a
non-compete at his/her current firm, many prospective
employers fail to mention the infamous non-compete in the
interview process...it's not exactly an enticement to join.
I also thought about the fact that I never received anything (other
than my continued employment) in exchange for signing the non-compete,
so you could argue that there was no real consideration given to
me.  Worse yet, the grid has changed since I started with the
payout getting thinner.  That too, seems like a reason that the
non-com shouldn't stand, but perhaps I'm just getting emotional.
Joe, thanks for the post.  I'm curious who your RJ recruiter was...maybe you could PM me on that?

I don't remember, so there's nothing to PM.

Interesting point you fellas are making about non-disclosure of the
non-compete....and the imminent pressure to sign.  They like to
use that pressure to get your ink on paper.

As I've said before, if their platform, their manner of doing business,
was so competitive, why must they work so hard to defend it with all
these lawyers and fancy non-compete clauses.   
Hmmmmmm......

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